Russia

Lack of component factories holds back Russian wind industry

RUSSIA: A lack of domestic wind-turbine manufacturers is holding back wind energy development in Russia, according to a report by Russian market research firm RBC.

Russia is struggling to establish domestic wind component production and has relied on imports in the past (pic: Mortrans)

As a result, the majority of planned wind projects has not been realised in recent years, as investors are unable to meet local-content requirements, even after the rules were relaxed earlier this year.

The local content requirement had originally been set at 65% from 2016. The amendments changed this to rise more progressively, starting from 20% for 2015. The level reaches 45% in 2018-2020, and 65% during 2020-2024.

In 2014, only one application to build a 51MW farm was approved by the Russian government when a tender for 1.6GW failed to attract sufficient interest from investors. The agreement is for the first stage of the Priyutnensky wind farm, in the Republic of Kalmykia, southern Russia, being developed by Alten, a Russian subsidiary of Czech investment firm Falkon Capital. The project is due to be commissioned by 1 December 2015. The Priyutnensky wind farm will consist of three stages, totalling 150MW.

In a previous tender in 2013, Solar Energy Holding, one of Russia's largest renewables developers, was selected to build seven or eight wind farms totalling 105MW from 2016 to 2018, mainly in southern Russia. But it was suspended because the developer could not meet existing local-content needs.

Partnerships

In February 2015, representatives of the China-based Lianyungang Zhongfu Lianzhong Composites Group, together with Russian Wind, a domestic producer of components for wind projects, held talks with the authorities of the Chuvash Republic, western Russia, about setting up a wind turbine blade factory in the region. Russian Wind already makes blades in the region, at facilities it rents from composite-products manufacturer Galen, but there is not enough capacity to meet the Russian demand for wind-turbine components.

Finally, Ekoenergomash, a subsidiary of Kazakhstan-based nuclear holding company Kazatomprom, is considering a joint venture to produce wind turbines with Russian Atomenergomash, which is part of Russian state-owned Rosatom nuclear monopoly.

Igor Bryzgunov, president of Russian wind-power industry association RAWI, said: "Russia currently has a shortage of domestic producers of multi-megawatt wind turbines, which means that further development of the market will mostly depend on foreign wind-power operators."

However, in accordance with current Russian legislation, the level of domestic content should reach 25% in 2016, rising to 65%. Russia already has all the required conditions to establish wind-turbine and component production, Bryzgunov said.

A recent RAWI survey revealed that several Russian companies are planning to start manufacturing wind turbines and components in the next few years. At least seven companies stated intentions to start making towers.

There are also plans for the production of blades, power converters and other components. In addition, at least two Russian companies are preparing for the production of wind turbines as part of joint ventures with European partners, Bryzgunov said. RAWI intends to draw up guidelines for global companies entering the Russian wind market to find Russian partners and produce wind-power components, he added.

The government approved a series of laws in 2013, submitting amendments in July 2015 that improve conditions for local sourcing and wind development, said Bryzgunov.

Under these laws, wind farms scheduled for construction in 2015-2024 should be built with capital expenditures set at $1,700/kW. Investors will have an opportunity to sign up with the government to supply power to the grid with a 12% return on investment for 15 years. The government target is to develop 3.6GW of wind capacity by 2024, extended from its previous deadline of 2020, and to commission up to 500MW a year.

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